Realord Group Announces 2017 Interim Results

Revenue increased by 133% to HK$216 million
Environmental Protection Business Contributes 65.6% of Revenue

1H2017 Interim Results Highlights

HONG KONG, Aug. 29, 2017 /PRNewswire/ -- Realord Group Holdings Limited ("Realord" or the "Company," together with its subsidiaries collectively known as the "Group," stock code: 1196.HK) is pleased to announce its unaudited interim results for the six months ended 30 June 2017 (the "Period"). The Group's results recorded an increase in profit by 6.6% to approximately HK$87.09 million for the Period.

For the period under review, the Group recorded a turnover of approximately HK$216.2 million for the six months ended 30 June 2017, representing a significant increase by 133.0%. The increase in the turnover of the Group was primarily due to the Group consolidating the operating performance attributable to the Environmental Protection Segment, amounted to approximately HK$141.9 million since the acquisition of Realord Environmental Protection Industrial Company Limited (formerly known as Top Eagle International Trading Limited). The overall decrease in the gross margin was due to the low gross profit margin achieved by Environmental Protection Segment, which contributed the majority part of the turnover of the Group. During the period, the results recorded approximately HK$87.09 million of profit. The earnings per share was HK7.33 cents.

The increase in profit attributable to the equity holders was mainly due to the fair value gain on investment properties amounted to approximately HK$144.1 million, but partly offset by the related deferred taxation of the fair value gain of approximately HK$41.6 million and the increase in corporate expenses.

Business review

The newly acquired Environment Protection Segment recorded a revenue of approximately HK$141.9 million during the period under review, representing 65.6% of total revenue of the Group. The segment result was profit of approximately HK$8.0 million during the period under review.

The Commercial Printing Segment recorded a revenue of approximately HK$38.9 million during the period under review, representing 18.0% of the total revenue of the Group. There was a slight increase in segment revenue of 1.2% to approximately HK$38.9 million as compared to approximately HK$38.4 million in the last corresponding period. However, the inflating operating cost resulted in similar level of operating profit of approximately HK$0.4 million for the period under review and the last corresponding period.

The Financial Services Segment recorded a revenue of approximately HK$5.4 million during the period under review, representing 2.5% of the total revenue of the Group. The revenue from this segment remained stable as compared from approximately HK$5.3 million in the last corresponding period to approximately HK$5.4 million during the period under review. The segment results increased from profit of approximately HK$1.1 million in the last corresponding period to profit of approximately HK$1.9 million during the period under review.

The Property Investment Segment recorded a revenue of approximately HK$9.1 million during the period under review, representing 4.2% of the total revenue of the Group. The revenue from this segment recorded approximately HK$9.1 million as compared to approximately HK$5.5 million in the last corresponding period. The profit from this segment decreased from approximately HK$179.1 million in the last corresponding period to approximately HK$150.8 million during the period under review. The decrease was mainly due to the fair value gain on investment properties being recorded during the period under review amounted to approximately HK$144.1 million was less than that in the last corresponding period.

The Motor Vehicle Parts Segment recorded a revenue of approximately HK$19.3 million during the period under review, representing 9.0% of the total revenue of the Group. With a view of tightening the credit control policy and shortening of credit period granted to the customers, the segment revenue noted a significant decrease by 50.2% to approximately HK$19.3 million as compared to approximately HK$38.8 million in the last corresponding period. The segment recorded a profit of approximately HK$0.1 million during the period under review as compared to a profit of approximately HK$1.7 million in the last corresponding period.

The Hangtag Segment recorded a revenue of approximately HK$1.6 million during the period under review, representing 0.7% of the total revenue of the Group. The segment revenue decreased significantly of 66.3% from the last corresponding period of approximately HK$4.8 million to approximately HK$1.6 million for the period under review. Through implementation of continuing cost control measures, including outsourcing part of manufacturing processes, the loss from this segment remained in a low level of HK$0.1 million during the period under review comparing to approximately HK$0.4 million in the last corresponding period.

Outlook

On 28 February 2017, the Group completed the acquisition of 60% equity interest of Realord Environmental Protection Industrial Company Limited (formerly known as Top Eagle International Trading Limited), which can diversify the business of the Group with the objective of broadening its sources of income. The Directors are optimistic about the prospects of the environmental protection industry and are of the view that it is an opportunity for the Group to further diversify the business scope of the Group through the acquisition. The Environmental Protection segment is engaged in dismantling and trading of scrap materials (e.g. scrap metal and PVC waste) and acting as an agent by sourcing scrap materials. The operating base is located in Wuzhou Import Renewable Resources Processing Park. Moreover, the Group has entered in an investment agreement, which costs approximately RMB 350 million to carry out a recycling and production of aluminum ingots project in the Park with a target annual production capacity of 100,000 tonnes, which means the Environmental Protection business will be strengthened.

The operating environment of the commercial printing and hangtag businesses will continue to be competitive in the coming years. The Group shall strengthen its business development team to achieve sales growth and increase market share, however, the intense competition in the Commercial Printing Segment shall limit the Group to pass the inflating operating cost to customers. Due to the persistent increase in production cost in the PRC, some of the customers shift its demand to other developing countries in Asia-Pacific region, the operating environment of Hangtag Segment is even more challenging and we foresee that customers' demand of hangtags labels, shirt paper boards and plastic bags would keep diminishing.

The Group is in the process to set up the PRC operations of Motor Vehicle Parts Segment in Guangzhou. We expect that the PRC operations will effectively contribute to the business expansion of the sales and distribution of motor vehicle parts business. Besides, the Group is in the process to develop the financial services business, which would provide financial services including securities brokerage, margin financing, money lending and financial leasing services. The Group had entered into an agreement with 5 other independent third parties to set up a joint venture Security Company named "Yuegang Securities Limited" to carry out securities businesses in Nansha Free Trade Zone, Guangzhou, the PRC. Through the Security Company, the Group could tap into the securities business in the PRC, which was considered as a strictly regulated industry. We believe the set-up of the Security Company, when materialised, represents a valuable investment opportunity for the Group to expand its securities services business and to enable the Group to exchange its business network and relationship in the PRC, and hence to gain a foothold in the PRC market.

Looking forward, the Group are optimistic about the prospects of the environmental protection industry and are of the view that it is an opportunity for the Group to further diversify the business scope of the Group through the acquisition. The Group will strike to explore for any potential real estate development or property investment opportunities. For sustaining a long-term growth, we will also keep on exploring all potential opportunity to develop its businesses.

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About Realord Group Holdings Limited

Realord Group Holdings Limited is a conglomerate listed on the main board of The Stock Exchange of Hong Kong (HKEx). The Group is principally engaged in financial services, property development, distribution and sales of auto parts, environmental protection, commercial printing and hangtag production across mainland China and Hong Kong. The Group has successively been a constituent stock of the Morgan Stanley Capital International (MSCI) Hong Kong Small Cap Index, the Russell Global Index, STOXX Indices, and Hang Seng Family of Indexes with wide recognition obtained from international investors. Realord Group has been the eligible securities in Shenzhen-Hong Kong Stock Connect.

For further information, please refer to the Company's website at http://www.realord.com.hk/